Wednesday, April 3, 2013

The Best Estate Plan is No Match for Unprepared Heirs

Over the course of my career, I have encountered many families who were
unprepared for the inevitable aging and loss of parents. These families
experienced unexpected rivalries that threatened to cripple or destroy the very
family unity and wealth that the parents and their estate planning attorney
hoped to protect.

Well-drafted estate plan documents are designed to
reflect clients’ instructions for passing their legacies to the right
beneficiaries and providing for care of clients and their families. However,
the best estate plan is no substitute for preparing heirs to deal with:
changing care needs of aging parents and other family members, the complexities
of estate and trust administration, and how to avoid elder financial abuse and
prevent or resolve conflict among siblings.

Rivalries and conflicts may
arise out of innumerable scenarios. For example, consider what can happen when
one sibling steps into a fiduciary role while the parents are living and no
longer able to manage their affairs unassisted or when a parent passes on. The
new fiduciary and other siblings have no idea what Mom or Dad promised to other
siblings. Misunderstanding and conflict can arise when monthly cash “gifts”
from Dad to one sibling are suddenly cut off without notice or discussion
because the trustee had no idea Dad was making these gifts; or a daughter claims
Mom had always promised her all of the family jewelry plus an equal share in the
balance of the estate. Without a process for communication and resolution, the
next step is too often costly litigation and permanent breakdown of family
unity.

Conflict is Inevitable.
Anticipate it. Decide on a Process for Resolving
it.

There will be disagreements among family members.
Whether disagreements are over relatively small or very significant issues, they
are inevitable. What is not inevitable is that the family will know how to
deal with disagreements and manage conflict. It’s how families prepare for and
manage conflict that makes the difference.

Few parents want to think
about conflicts among their children, but successful families engage in
foundational processes that prepare heirs for parents’ inevitable aging and
loss. Working with a neutral mediator in a confidential setting, these families
engage in education and planning, anticipate and discuss possible conflicts, and
institutionalize conflict resolution. These processes help families and their
estate planning attorneys avoid or at least significantly reduce family discord,
which in turn helps protect and preserve family unity and wealth. Estate
planners have a unique opportunity to integrate estate planning mediation into
the estate planning process and educate clients and their families about its
benefits.

Prepare Heirs Using
ConfidentialEstate Planning Mediation

Estate planning
family mediation is an appropriate estate planning foundation. This involves
bringing all family members together with a mediator in a confidential setting.
Mediation conducted by a neutral mediator serves a different purpose than family
meetings conducted by the estate planning attorney. At least in California,
mediation confidentiality is provided by statute, and mediation with a
neutral mediator allows for confidential open discussion. Family meetings with
the estate planning attorney are focused on reporting and are limited to topics
that avoid breach of the attorney-client privilege. In mediation, the mediator
is not competing with the estate planning attorney, attorney-client privilege is
not at risk, and the result is a memorandum of understanding for the family and
the estate planning attorney.

In this confidential setting, family
members hear each other’s concerns and ideas, learn and discuss, e.g., what is
required of a family fiduciary who will administer the trust/estate both during
the lifetimes and after the deaths of the parents; who wants the position and
who might best serve as fiduciary; how to avoid elder abuse and elder financial
abuse; express thoughts about inheritance; allow all family members to
participate in brainstorming ideas to meet their family needs. The approach is
meant to provide a safe setting for family members to express concerns and ideas
and work out their own solutions in light of the parents’ wishes. Involved
family members are less likely to dispute what they had a hand in creating. Of
course, the parents are free to plan their estates as they desire with the
advice of their own estate planning attorney.

A signed memorandum of
understanding is produced, reflecting the ideas and issues discussed, solutions
proposed, agreements reached, and a statement whether or not, and to whom, the
memorandum may be released. Confidentiality of this memorandum may be waived to
be shared with the parents’ estate planning attorney, investment advisor, and
other appropriate advisors, as a roadmap for estate and financial
planning.

Participants may return to mediation to resolve new conflicts
or matters that have changed since the initial mediation. Should a family
member later raise issues with the attorney about the parents’ estate plan, the
attorney will be able to refer the family member back to the memorandum of
understanding in which they participated.

Both estate planners and their
clients benefit from estate planning family mediation. Prepared heirs are less
likely to create or sustain conflict within a family or against the estate
planning attorney. Estate planners who reinforce estate planning family
mediation with their clients reduce the chances for unresolved misunderstandings
and disputes, and increase opportunities to protect family unity and
wealth.

About Me

I am a Massachusetts Estate Planning attorney located in Merrimac, MA. My practice consists exclusively of Estate Planning, Elder Law, Probate, Trust Administration, and Business Planning. Please visit my website at www.jpestateplanning.com for more information or to sign up for my quarterly e-newsletter. I can also be reached at (978)319-6006 or justin @jpestateplanning.com